Amazon.com 2005 Annual Report Download - page 80

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
our recommendations features, infringes a patent obtained by Cendant purporting to cover a “System and Method
for Providing Recommendation of Goods or Services Based on Recorded Purchasing History” (U.S. Patent
No. 6,782,370) and sought injunctive relief, monetary damages in an amount no less than a reasonable royalty,
prejudgment interest, costs, and attorneys’ fees. In February 2005, Cendant voluntarily withdrew the complaint
without prejudice. In June 2005, however, Cendant re-filed a new complaint containing substantially the same
claims. In response, we filed a countersuit in the United States District Court for the Western District of
Washington (since transferred to the District of Delaware) alleging that Cendant’s parent, Cendant Corporation,
and its affiliates Orbitz, Inc., Budget Rent A Car System, Inc., Avis Rent A Car System, Inc., and Trilegiant
Corporation infringe certain patents owned by us and our subsidiary, A9.com. We dispute Cendant’s allegations
of wrongdoing in its complaint and intend to vigorously defend ourselves in these matters.
In December 2005, Registrar Systems LLC filed a complaint against us and Target Corporation for patent
infringement in the United States District Court for the District of Colorado. The complaint alleges that our
website technology, including the method by which Amazon.com enables customers to use Amazon.com account
information on websites that Amazon.com operates for third parties, such as Target.com, infringes two patents
obtained by Registrar Systems purporting to cover methods and apparatuses for a “World Wide Web Registration
Information Processing System” (U.S. Patent Nos. 5,790,785 and 6,823,327) and seeks injunctive relief,
monetary damages in an amount no less than a reasonable royalty, prejudgment interest, costs, and attorneys’
fees. We dispute the allegations of wrongdoing in this complaint and intend to vigorously defend ourselves in
this matter.
Depending on the amount and the timing, an unfavorable resolution of some or all of these matters could
materially affect our business, results of operations, financial position, or cash flows in a particular period.
Inventory Suppliers
During 2005, no vendor accounted for 10% or more of our inventory purchases. We do not have long-term
contracts or arrangements with most of our vendors to guarantee the availability of merchandise, particular
payment terms, or the extension of credit limits.
Note 6—STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
We have authorized 500 million shares of $0.01 par value Preferred Stock. No preferred stock was
outstanding for any period presented.
Stock Award Plans
Employees vest in restricted stock unit awards and stock options over the corresponding service term,
generally between two and five years. Outstanding stock options generally have a term of 10 years from the date
of grant.
Stock Award Activity
We granted stock awards, which since October 2002 have consisted primarily of restricted stock units,
representing 6 million, 3 million, and 2 million shares of common stock during 2005, 2004, and 2003 with a per
share weighted average fair value of $36.50, $43.77, and $30.14.
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